Sai Life Sciences Limited — Proxy Solicitation & Information Statement 2025

Jun 6, 2025

==> picture [139 x 32] intentionally omitted <==

Date: 6 June 2025

To To National Stock Exchange of India Limited BSE Limited Exchange Plaza, C-1, Block G, Bandra Kurla Phiroze Jeejeebhoy Towers, Dalal Street Complex, Bandra (E), Mumbai – 400 051 Mumbai – 400001 NSE Scrip Symbol: SaiLife BSE Scrip Code: 544306

Sub: Reply to IiAS on recommendation of Postal Ballot Notice (under of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

Dear Sir/ Madam,

Pursuant to the requirements of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, please find attached the reply sent to Institutional Investor Advisory Services (IiAS) on recommendation of the Postal Ballot Notice. The recommendation can be accessed on the below link:

https://www.iiasadrian.com/mr/16113

Request you to kindly take the same on record.

Thank you.

For Sai Life Sciences Limited

RUNA Digitally signed by RUNA KARAN KARAN Date: 2025.06.06 22:26:30 +05'30'

____ Runa Karan Company Secretary & Compliance Officer Membership No.: A13721

Encl: As above

Sai Life Sciences Limited (CIN: U24110TG1999PLC030970)

Corporate office

Registered office

Plot No. DS-7, IKP Knowledge Park, Turkapally (V), Shameerpet Mandal, Medchal-Malkajgiri (Dist), Hyderabad -500078, Telangana, India.

Contact us T: +91 40 6815 6000, F: +91 40 6815 6199 E: info@sailife.com W: www.sailife.com

L4-01 & 02, SLN Terminus, Survey #133, Gachibowli Miyapur Road, Gachibowli, Hyderabad – 500032, Telangana, India.

Runa Karan

Runa Karan
From:	Runa Karan
Sent:	Friday, June 6, 2025 14:18
To:	hetal.dalal@iias.in; anup.pawar@iias.in; solutions@iias.in
Cc:	amit.tandon@iias.in; Sivaramakrishnan Chittor
Subject:	Sai Life Sciences Limited - Response to Proxy Advisor Report dated 29 May 2025
Importance:	High

To,

Institutional Investor Advisory Services (IiAS)

Dear Sir / Madam,

Sai Life Sciences Limited (“ Company ” or “ we ”) has been made aware of the proxy advisory report from Institutional Investor Advisory Services (“ IiAS ”) dated May 29, 2025 (“ Report ”) setting out your voting recommendations in relation to the resolutions proposed to be passed through postal ballot notice dated May 15, 2025 (“ PB Notice ”). While the Report has not been provided to the Company directly, the Company would like to provide certain clarifications in relation the following matters and would request IiAS to take the same into consideration.

We note that you have recommended voting ‘AGAINST’ the resolutions for (i) approval and ratification of ESOP Scheme 2008 (“ ESOP 2008 ”) and Management ESOP Scheme 2018 (“ ESOP 2018 ”) (collectively referred to as “ ESOP Plans ”); and approval for extension of ESOP Plans to employees of subsidiary companies and group companies; and (ii) appoint Sivaramakrishnan Chittor as Whole-Time Director and Chief Financial Officer (“ WTD & CFO ”) and fix his remuneration.

In relation to the same, we would like to submit the following clarifications / comments:

Resolution Nos. 1, 2, 3 and 4 relating to approval for ratification of ESOP Plans and extension of ESOP Plans to employees of subsidiary and group companies.

1. We note that you have recommended voting ‘AGAINST’ resolutions relating to ratification of ESOP Plans based on the following grounds:

2. (i) Ratification of ESOP Plans will result in maximum dilution of 6.3% on the expanded capital base (for the unexercised ESOPs).

3. (ii) NRC being provided the discretion to determine the exercise price.

4. (iii) NRC being provided the discretion to determine the vesting criteria and no disclosure on vesting parameters and targets.

5. (iv) Extension of ESOP Plans to employees of group companies.

6. In relation to your concern relating to paragraph 1(i) above, please note that there is no legal prescription vis-à-vis the maximum number of stock options that can be provided by a company under an employee stock option (“ ESOP ”) scheme.

1

1. The total ESOP pool size is fixed at 14,045,310 ESOPs (combined under ESOP 2008 and ESOP 2018), and this has been fully disclosed in the prospectus issued by the Company at the time of the initial public offering of its shares (“ IPO ”). Please note that dilution of 6.3% represents the total ESOP pool including ESOPs that have been exercised and ESOPs that have already vested and are pending exercise. Further, we would like to submit that the maximum number of ESOPs that can be granted under the ESOP Plans was already approved by the shareholders at the time of adoption/modification of ESOP Plans. Therefore, ratification of ESOP Plans is in line with the legal requirements and does not impact the pool size and overall dilution in the Company’s share capital. A detailed breakup of the pool shows that the actual dilution impact on account of this resolution is significantly lower, as outlined below.

2. (i) 5,644,430 ESOPs have already been granted and exercised — no further dilution impact.

3. (ii) In addition to the ESOPs set out in paragraph 3(i) above, 50,32,070 ESOPs were granted under the ESOP pool, out of which 1,693,360 ESOPs had vested and were pending exercise and the balance was unvested. The dilution impact of the vested ESOPs was factored into the price band and valuation accordingly.

4. (iii) Currently, 3,368,810 ESOPs are available for grants under the ESOP pool (subject to any ESOP that may lapse in the future and become available for grant under the ESOP Plans).

Therefore, the actual potential dilution pursuant to this resolution, even if we compute the ESOPs that were not factored into the price band and valuation relates to 3,368,810 ESOPs, which equates to only 1.6% of the expanded capital base, significantly lower than the headline 6.3% (Refer Annexure below for detailed working)

Reference: Page 120 -129 of Prospectus

https://www.sebi.gov.in/web/?file=https://www.sebi.gov.in/sebi_data/attachdocs/feb-2025/1739870888681.pdf#page=4&zoom=page-width,-10,600

1. In relation to your concern relating to paragraph 1(ii) above regarding the discretion of NRC to determine the exercise price, we would like to submit that as per Regulation 6(2) of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (“ SEBI SBEB & SE Regulations ”), read with Regulation 17 of the SEBI SBEB & SE Regulations, a company is free to determine the exercise price (subject to conforming to the accounting policies), an extract of which is as below.

“ The company granting options to its employees pursuant to an ESOS shall be free to determine the exercise price subject to conforming to the accounting policies specified in regulation 15 of these regulations .”

1. We request you to note that the NRCs (comprising independent directors) under the SEBI regulations are subject to rigorous governance standards. Therefore, while exercising any discretionary powers under the ESOP Plans, the NRC will consider various factors such as its impact on the employees, the financials of the company, and alignment with interests of the shareholders. A fixed exercise price under ESOP Plans would be counterintuitive to the objective behind introduction of ESOP Plans.

2. We also note from the Report that you have raised concerns over Company granting stock options at a significant discount to the market price, thereby leading to misalignment between the interests of investors and those of employees. In this regard, we would like to clarify that historically, the exercise price, under the ESOP Plans, has been determined based on the price at which investments have been made in the Company, which was further marked up / increased proportionately at the time grants were made subsequently. For example, as stated in the prospectus, the exercise price of the ESOPs granted post 2018 is equal to, or higher than, Rs. 1273 based on the price per share paid by the private equity investor at such time. Further, we would also like to clarify that no ESOP grants were made by the Company at face value of shares or at a deep discount to the relevant investment price. In view of this, we request you to consider your recommendations in light of such facts.

3. Separately, we note that you have also raised concerns regarding the absence of disclosure of maximum discount, vesting criteria left at NRC discretion and no disclosure on vesting parameters and targets. Based on review of the Report, we understand that your concern on non-disclosure of vesting parameters and targets by the Company is linked to assumption that the Company will grant ESOPs at deeply discounted rates. Please refer to paragraph above.

2

1. In any case, we would like to submit that the ability to determine vesting of ESOPs has been proposed to be provided to the NRC to tailor the ESOPs (and the terms governing it) based on individual performance and contributions which ensures that high performing employees are adequately remunerated (as opposed to devising a single formula for granting ESOPs to all employees). Such flexibility also remains crucial to the Company’s success and business, resulting in lower attrition among high performing individuals. Please also note that the terms of the grant would be within the parameters set out under the ESOP Plans and customized to ensure that the employee is adequately incentivized, motivated and their interests are aligned with that of the Company.

2. Please note that the ESOP Plans envisage vesting conditions to be based on time-based parameters and performance-based parameters. In this regard, we would like to submit that in practice generally, the Company has granted ESOPs that have both time and performance-based vesting conditions.

3. In relation to your concern relating to paragraph 1(iv) above, we note that IiAS has no issue with extension of ESOP Plans to employees of subsidiary companies and have raised a concern over extension of such plans only to employees of the group company(ies). Please note that SEBI SBEB & SE Regulations i.e., the governing law allows for grants to be made to employees / directors of group companies, with prior approval of shareholders. In this regard, we would like to clarify that the Company does not have any group company currently. The intent for such resolution is to obtain approval of shareholders, if in future, any such grants are made to employees of group companies (once established). Therefore, if in future, grants will be made to employees of group companies, the NRC at that point of time, will consider relevant factors such as role and level of the employee(s), contribution of the employee towards the growth of the group company, etc.

Resolution No. 6 relating to appointment of Sivaramakrishnan Chittor as WTD & CFO, liable to retire by rotation, for five years from 28 April 2025 and fixing his remuneration.

1. We note that you have recommended voting ‘AGAINST’ resolution relating to appointment of Sivaramakrishnan Chittor as WTD & CFO, and fixing his remuneration, on the following grounds:

2. (i) Inability to ascertain total compensation due to absence of clarity on increments, variable pay components or ESOPs.

3. (ii) Non-disclosure of benchmarking of Mr. Chittor’s proposed remuneration against his peers and justification for pay.

4. Sivaramakrishnan Chittor currently serves as the Chief Financial Officer and Head of Shared Services. Mr. Chittor has been with the Company since 2009, serving as Head of Finance / Chief Financial Officer (CFO) from 2009 to 2019, and again from 2021 onwards. During the interim period (2019-2021), he served as Chief Operating Officer (COO), ensuring unbroken leadership continuity within the organization. Over the years, he has played a central role in the Company's financial turnaround, EBITDA expansion, and IPO execution, contributing significantly to strategic and operational readiness. His proposed appointment as WTD & CFO brings institutional memory and board-level strategic consistency, without adding any cost burden. The resolution in relation to his proposed remuneration contemplates no change in the compensation structure (which has been previously approved and recommended by the NRC relying on an analysis of market trends conducted by independent sources, for positions of like nature in addition to other relevant factors), and the usual practices of determining annual increments and other benefits (including variable compensation) would be followed.

5. In relation to your concern relating to paragraph 1(i) above, particularly on the aspect of non-disclosure of ESOP compensation as applicable to Mr. Chittor, please note that currently, there is no proposal to grant any new ESOPs to Mr. Chittor under the ESOP Plans, and details of the ESOPs already granted to him have been disclosed in the prospectus. In relation to the ESOPs that have already been exercised by Mr. Chittor, the details of the fair value are set out in the prospectus. Please note that Mr. Chittor’s remuneration for the financial year 2023-2024 as disclosed in the prospectus (please refer to page 236) was INR 43.70 million, which included the perquisite value pursuant to the ESOPs that were exercised by Mr. Chittor. As regards the ESOPs that are yet to be exercised by Mr. Chittor, the fair value of the ESOPs will be based on the market value of the shares of the Company on the date of exercise, and therefore, the actual benefit that will accrue to Mr. Chittor or the fair value of the ESOPs, can be determined only at the time of the exercise of ESOPs.

3

1. Moreover, in this regard, please note that Section 197 read with Schedule V of the Companies Act, 2013 (“ Companies Act ”), sets out the maximum limit on the total managerial remuneration a public company can pay to its directors (including managing and whole-time directors) and managers. In this regard, it is pertinent to note that Mr. Chittor’s total remuneration (i.e., salary, perquisites, commission, allowances and ESOPs) in any one financial year shall be within the overall permissible limit of Section 197 read with Schedule V of the Companies Act. This has already been disclosed in the explanatory statement annexed to this PB Notice. Therefore, the overall remuneration payable to Mr. Chittor is not uncapped.

2. Further, you have noted that the Company has not provided details/ information regarding Mr. Chittor’s increase in salary/ annual increments. In this regard, please note that any salary increment will be subject to thorough assessment by the Company of Mr. Chittor’s performance and industry trends, which shall also be subject to confirmation of the board of directors of the Company (“ Board ”) based on the recommendation of NRC, ensuring that adequate approvals are in place and relevant factors are considered. This has also been highlighted in PB Notice. As set out in paragraph 4 above, the overall remuneration payable to Mr. Chittor will be within the permissible limits of applicable laws.

3. We would request you to take a note that the variable pay of Mr. Chittor shall be determined as per the company policies and appropriate financial parameters will be considered to ascertain his individual entitlement. Further, the variable pay as applicable to Mr. Chittor at the end of each financial year, shall be determined and approved by the NRC and Board, and the same will form a part of ‘allowance’ as envisaged in the explanatory statement to the PB Notice. This shall be linked to the performance of the Company including achievement of EBITDA targets as per the annual business plans that may be approved, along with the individual’s performance, which shall be rigorously evaluated, in line with the parameters and the limits applicable for other senior management personnel.

In light of the above, the Company submits the resolutions 1, 2, 3, 4, and 6 are fully compliant with applicable law and it has made adequate disclosures in respect thereof.

Please note that the matters to be transacted pursuant to the PB Notice, have been approved by the NRC and Board after thorough deliberations and considerations and are in the best interest of the Company and all its stakeholders.

If you need any clarifications or have any queries in relation to the above, we are available to speak, and you can contact the undersigned.

Further, we request you to share our response with all your subscribers and persons to whom the original Report has been circulated to. We also sincerely urge you to amend your recommendations on these resolutions based on the above and issue a revised report under intimation to us.

Thanking you,

Yours faithfully,

For Sai Life Sciences Limited

Runa Karan

Company Secretary & Compliance Officer

4